Gaon Group published its second-quarter report. After a day of accounts with unusual lines, this is one in which every figure sits where you would expect it.
Errors or inaccuracies are possible. Spotted something that looks wrong? Write to me and I will correct it.
The Quarter
| NIS millions | The quarter | Share of revenue |
|---|---|---|
| Revenue | 198.8 | |
| Gross profit | 54.1 | 27.2% |
| Operating profit | 28.5 | 14.3% |
| Pre-tax profit | 21.4 | 10.8% |
| Net profit | 16.2 | 8.1% |
| Attributable to shareholders | 16.1 | |
| Basic earnings per share | NIS 0.35 | |
| Balance sheet total | 1,111.1 | |
| Shareholders' equity | 499.6 |
A Report Without Surprises
And that sounds like faint praise, and after today it is not.
| Gross margin survival | about 53% |
| Financing as a share of operating profit | 24.9% |
| Effective tax rate | 24.5% |
| Minority share of profit | negligible |
| Leverage ratio | 2.2 to one |
And it is worth seeing that against what we read today.
Survival of 53% sits squarely in the range of industrial and services companies - close to Matrix and Afcon, which showed 52% and 49%.
Financing takes 24.9% - a moderate share. For comparison, today we saw Dalia Energy at 63.0% and Nofar at 121.9%.
And the tax rate, 24.5%, is close to Israel's corporate rate. No benefit flattering the quarter and no charge distorting it - and that matters, because today we saw tax rates of 16.7%, 72.3% and 78.8%.
The meaning: in a report like this, net profit genuinely describes the activity. There is no single line deciding the outcome in its place, and nothing needs to be stripped out to understand what happened.
And the Balance Sheet
| Balance sheet total | NIS 1,111.1 million |
| Shareholders' equity | NIS 499.6 million |
| Leverage ratio | 2.2 to one |
NIS 1.11 billion of assets on quarterly revenue of NIS 198.8 million - a ratio of 5.6 times, reasonable for an industrial company holding inventory, equipment and receivables.
And leverage of 2.2 to one also explains why financing takes only a quarter of operating profit: there is no heavy balance sheet to fund here.
הזווית שלי
דעה אישית של אילן אברמוב - לא ייעוץ ולא המלצה
After reading 33 Israeli sets of accounts today, this report teaches me something precisely because it is ordinary.
Most of today's reports required stripping something out: a revaluation entering operating profit, a tax line that reversed a sign, a minority taking a third, or financing that swallowed more than the entire profit. In each of them, "net profit" was not the figure that described the quarter.
Here it is.
And what I take from that is that reports that are easy to read are not necessarily the best ones, but they are the ones where what is written is what happened. And that is worth something when comparing companies.
And what I would look for in the full accounts is the breakdown across the group's activity areas. A gross margin of 27.2% is an average, and when a group operates in several fields, that average conceals a range.
(It is important to stress: this is my personal opinion only, and nothing herein constitutes a recommendation to take any action.)
